Lack of business trust concerning CEOs

Complacency around trust especially in relation to wages is a threat to growth

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One of the consistent risks facing local CEOs over the past several years has been the concern about a lack of trust in business. Trust is foundational to ensuring growth and the recent industrial relations issues means trust is once again under the spotlight. 

Trust has been a key topic for Australia’s CEOs over the past several years. Many have been identifying their own trust drivers and balancing the competing forces of delivering to shareholder expectations, as well as those of customers, employees and the general community. 

After six consecutive years of rising CEO concern about a lack of trust in business, the concern fell from a high of 65% last year to 56% in 2019. Now, trust is back on an upward trend. In 2020, 63% of local CEOs are concerned about a lack of trust in business. 
 

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Leaders understand and are acting on new expectations from their stakeholders, but recent high profile cases, including examples where trust has been broken, such as in underpayment of wages, means complacency around trust cannot be allowed.

The CEO Survey was taken in September of 2019. Since then, wage trust has been one of the blind spot issues identified through the Australia Matters campaign. One of the key risks facing businesses today is ensuring employees are being accurately paid for the work they do.

Complicated challenges

A combination of factors have contributed to the challenge so many employers are now facing; some direct attention to the complexity of the industrial relations system, some express concern around the declining presence and power of unions as a source of oversight within the workplace, whilst others point to employers having underinvested in payroll systems and processes. 

An employer’s payroll function manages what is often the biggest expense in a company's books. It also provides, on a regular basis, the front-line employee experience. Yet, payroll often receives insufficient support from both an investment and a controls perspective. But change is coming.

Increasingly, boards are viewing payroll as a high risk area, to be continuously managed, supported and monitored, in a similar way to Workplace Health and Safety risks. They are requiring their leadership teams to take proactive steps to ensure the risk in payroll is managed.

Advocates of trust 

Whilst there has been a steady decline of union presence in the Australian workforce, other parties and platforms are emerging to provide systems for exposure, investigation, and rectification: 

  • The Fair Work Ombudsman, as federal regulator, investigates compliance (and has the power to prosecute non-compliance), increasingly in the public domain following significant levels of employer disclosure;

  • The media, which has lead key investigations and publicised outcomes; 

  • Social media, which allows employees to band together to identify, promote and force action around perceived underpayment issues; and

  • Class action litigation firms, who have increasingly turned to employment (and minimum entitlement) based claims, including in relation to misclassification of contractors and casual employees. 

The vast majority of employers set out to do the right thing by their people, but the chances of inadvertently making a mistake are extremely high, where small mistakes made across large workforces over several years add up to very large numbers.

80% of local CEOs said they were concerned about over-regulation as a top threat to growth. Of those, nearly 1 in 2 (47%) cited labour (e.g. wages, workplace safety) as an area of regulation they are most concerned about. It is one of the top three concerns behind that of industry specific concerns (67%) and data privacy and cybersecurity (55%).

It is in everyone’s interest for government, business leaders, workers, unions, regulators and other stakeholders to engage together and address the challenges in the system that are contributing to errors of underpayment.

For industries with a high prevalence of underpayment of workers’ entitlements, PwC’s Australia Matters modelling using Fair Work Ombudsman data estimated that there is in the order of ~$1.35 billion in underpayments per year.

Five actions business leaders should take to avoid complacency, differentiate organisations and set up success include:

ensure legal advice is sought around interpretation of agreements

provide sufficient investment to payroll functions including ensuring systems are up to date and payroll personnel attend either general or (external led) client specific training

create a controls program to monitor and review payroll risk, as one would monitor workplace health and safety practices

review payroll practices for other territories, as well as in Australia

engage an external advisor to undertake a deep dive payroll process review and to review the payroll and time/attendance system configuration on a regular (at least every three years) basis.

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Contact us

Rohan Geddes

Partner, Payroll Consulting, PwC Australia

Tel: +61 2 8266 7261

Kieran McCann

National Thought Leadership Manager, PwC Australia

Tel: +61 (2) 8266 0252

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